industry shutdown related to the Covid-9 pandemic in Eu-
rope. The most open economy by far is Slovenia, and that
is likely to be reflected in the final macroeconomic data
for 2020. Yet, Slovenia is far better equipped to move ac-
tivities online than the rest of the target markets. Never-
theless, some characteristics do isolate Slovenia and Cro-
atia from non-EU sample of countries in focus. Slovenia
and Croatia had substantial stimuli packages, reflecting to
some degree their greater ability to borrow on interna-
tional capital markets. In addition, their stringency
measures were less severe compared to the non-EU coun-
tries. Contrary, the latter ones have shown to be highly
exposed to fall in FDI and heavily reliant on foreign aid.
Not least important to mention, the non-EU countries also
do have more favorable demographics.
In general, the Croatian economy will suffer a severe set-
back in 2020 since Covid-19 caused domestic and interna-
tional demand to shrink drastically. The reason for this is
the country’s reliance on its dominant tourism sector,
which accounts for a quarter of Croatia’s GDP. On top of
the disruptions in tourism, Croatia had to cope with the
impact of strong earthquakes which struck its capital Za-
greb and its surroundings during the year 2020, causing
damage estimated in the region of EUR 5.7 billion. To re-
lieve local businesses with aggravated circumstances for
loans repayments, a moratorium for three months on ob-
ligations to banks was introduced already in the first quar-
ter. The Croatian Banking Association additionally agreed
to defer the repayment of loans to the tourism sector,
which had been severely hit by Covid-19, until mid-2021.
The Croatian Bank for Reconstruction and Development
(HBOR) also issued a moratorium on debt service for three
months and further announced that it would extend its
export loan insurance program. Private lending towards
the end of 2020 mainly relies on housing loans. The second
wave of infections should therefore be offset somewhat
by the resilient private consumption whose increase
should extend into 2021, supported by low inflation,
changes in income tax, accumulated involuntary savings
and the fact that large-scale layoffs have been avoided.
In Slovenia, the lockdown measures and consumer pessi-
mism contributed to a sharp fall in private spending, while
investment contracted together with a shrinking of orders
in manufacturing, most notably in exporting sectors. Pub-
lic spending was the only component of the GDP which
rose. The government responded by adopting several
stimulus packages totaling ca. EUR 7 billion. Several
measures to control unemployment, and government-is-
sued tourist vouchers remain in place. A 12-months long
deferral on loan payments on capital and interest coming
due was put in place in March 2020. A public guarantee of
EUR 2.2 billion was also introduced to cover loans ex-
tended to non-banking enterprises. Companies will re-
main conservative in their investment spending, espe-
cially after signs of firms building-up their inventories to
hedge against renewed disruption to supply chains, and
Slovenian consumers are expected to remain one of the
more savings-oriented populations in the EU. However,
there seems to be quite strong purchasing impulses within
the household sector. Prospects for a strong recovery in
2021 exist, depending, of course, on the economic situa-
tion of the country's trading partners and the stabilising
role of households´ spending. The government will look to
restart the public and private investment cycle in con-
struction; it has published a priority list of infrastructure
projects and has high hopes for getting the most out of
the allocated EU Recovery Fund.
In Bosnia and Herzegovina (BiH), the Covid-19 pandemic
weighs severely on private consumption, which accounts
for almost 75% of the country’s GDP. The Federation of
Bosnia and Herzegovina and its capital Sarajevo will suffer
in particular, given their higher reliance on the services
sector, including tourism. Data show that the tourism sec-
tor was hit particularly badly in April by Covid-19, as was
the case in the rest of the region, with a drop of 99% year
on year in terms of tourist arrivals. The BiH banking agen-
cies announced a six-month loan repayment moratorium
for restructuring credit arrangements for individuals and
legal entities in light of the economic downturn caused by
the pandemic. As far as 2021 is concerned, it can be ex-
pected that investments will pick up again in light of post-
poned public projects such as the expansion of the coun-
try’s energy and transport infrastructure. This will help
real GDP growth to reach around 3% next year, but will
remain among the weakest in the region, reflecting among
other factors, a more conservative policy stance and in
particular less scope for fiscal stimulus, simultaneously in-
creasing the country’s reliance on foreign aid and loans.
The Covid-19 pandemic deeply affected Montenegro’s
economic growth in 2020, since tourism is the most im-
portant pillar of the country’s economy with a share of
around 22% of GDP and income from tourism generating
revenue in the amount of EUR 1.1 - 1.3 billion. Tourism
directly and indirectly creates a total of around 36,000
jobs and thus a fifth of all employment. In addition to
tourism, Montenegro is also counting on its growing role
as a hub for electricity traffic between the Balkans and
Italy, but this suffers from the temporary shutdown of
large investment projects in the energy and construction
sectors caused by Covid-19. The country’s GDP is expected
to contract by 9% in 2020, to be followed with a recovery
of 5% in 2021. In July, the Central Bank announced that
banks are obliged to grant a moratorium to borrowers
from the country’s tourism as well as agriculture, forestry,